The Organisation for Economic Co-operation and Development (OECD) lowered its forecast for India’s economic growth for the current fiscal year by 0.2 percentage points to 9.7 percent on Tuesday.
The advanced economies group forecasted 7.9 percent growth in the coming fiscal year, 0.3 percentage points lower than previously forecasted. If the forecasts are true, India’s GDP will be the fastest expanding large economy in both of these years. It would be followed by China at 8.5% in 2021 and Spain at 6.6% in 2022. China’s economy is expected to decelerate to 5.8 percent in the coming year.
“High-frequency activity indicators, such as Google location-based measures of retail and recreation mobility, suggest global activity has continued to strengthen in recent months, aided by improvements in Europe and a marked rebound in both India and Latin America,” according to the OECD’s latest report, titled Economic Outlook, Interim Report, Keeping the Recovery on Track.
However, the predicted production gap in India’s GDP from pre-pandemic levels is too large. “The production deficit from the pre-pandemic path in the median G20 emerging-market economy at the end of 2022 is anticipated to be double that in the median G20 advanced economy, and particularly large in India and Indonesia,” according to the OECD.
Consumer price inflation in India is expected to fall to 5.9 percent in the current fiscal year, down from 6.2 percent the previous year, according to the Organization. At this rate, inflation would be somewhat lower than the Reserve Bank of India’s top tolerance range, which is 6%. According to the OECD, inflation will decline to 5.5% next year.